Overnight asset classes got a jolt following a report by Nikkei that Obama was moving toward naming Summers the next Fed chairman, citing “several close US sources,” pushing stocks modestly lower in Europe, with bond yields higher. According to the report, Obama is to name Summers as next Fed chairman as early as late next week, after the Federal Open Market Committee meeting. Otherwise, risk is still digesting the news of the confidential Twitter IPO, as it is becoming quite clear that some of the largest names (Hilton also announced yesterday) are seeking to cash out in the public markets. Is this the top?

USDJPY has been sliding (JPY strength) the last few days even as US equites have pushed higher. Carry-fueled exuberance has been replaced by short-squeeze and VIX (hedge) unwinds as ammo but yesterday saw VIX converge and shorts underperformance at extremes. The performance so far this moring has been weak for stocks. Very low volume is rising as we fade lower and retrace the entire late-day ramp idiocy of yesterday. USDJPY at 99.00 seems the line in the sand and with WTI pushing higher (back above $109) as Syria grows louder and more emboldened is not helping.

Jitters from Syria still abound, as confirmed by reports from the Israeli army that two shells had hit the Southern Golan region. Despite the reports that the shelling appeared to be errant, WTI remains near session highs as markets remain sensitive ahead of the meeting between US Secretary of State Kerry and Russian Foreign Minister Lavrov in Geneva over the next two days. Buying of the 10Y is also prevalent and the yield on the benchmark bond was has dropped below 2.90%, or at 2.88% at last check. Today's key economic news in the US session will be the weekly claims report, the Fed buying 10 Year bonds at 11 am followed by the Treasury selling 30 Year bonds at 1 pm (this follows the Fed buying 30 Year bond yesterday: yes ironic).

What is offsetting the drop in crude prices following Obama's latest embarrassing backtracking from his "blow things up first, ask Congress later" peace track? According to some, it is this note from Goldman which suggests oil price pressure from an improving geopolitical picture will be offset by rising backwardation.

Despite earlier comments from Obama on Tuesday night, who called for a pause in authorizing military strikes on Syria, which led to another drop in crude prices overnight, the drop has since reversed and both WTI and Brent Crude contracts are trading in the green. Whether this is the result of a note by Goldman analysts who noted that the Brent crude sell-off was overdone and that they see no improvement regarding the conflict in Libya which is constraining oil production, or because Russia is once again throwing hurdles in the international process to force Syrian disarmament, is unknown. The lack of any key catalysts and no USDJPY levitation, led to most global markets unchanged, and futures currently trading sideways. What is not trading sideways is Apple which is down over 2% to just over $480 as all hopes of a China Mobile deal fall apart, coupled with pervasive critical panning of the new iPhones which, aside for the commodity version, is just the old iPhone with an extension that allows the NSA's new fingerprint database to be filled in record time.

UPDATE 2: French draft UN security council resolution would give Syria 15 days to make complete declaration of entire chemical arms program

UPDATE 1: NASDAQ Futures are fading the Obama "Pause" spike after AAPL is not announcing a China Mobile deal

Starting just 1 minute late, the President begab by unapologetically conjuring images of WWI and WWII and stuck to the line that "we know" Assad was responsible for killing his own people with Sarin. Then moved to fear-mongery over what Iran might do, adding that he was very much for strikes. But, in giving Congress the hot potato he knew decision would be difficult. The US military does not do 'pin pricks' and a "targeted" strike will send a message to Assad. While recognizing the need for a diplomatic solution, Obama made it clear that those efforts would follow a military strike. But then, after all the angry banter, he then backed down and said, will work for peaceful solution by putting the strike on hold and will bring a resolution to UN. Ending on a more aggressive note, he warned Republican and Democrat lawmakers to rethink their opposition to the strikes should they be needed.

From the open of yesterday's US day session, Treasuries had been selling off as risk-on flows encouraged by Syrian 'compromise' and apparent good data from Asia (China crude imports lowest in 11 months and Japanese GDP miss). It seems that hope-fueled trend continues its momentum run this morning in stocks but once the JOLTS data hit and showed the 'recovery' for what it really is, it appears Treasuries are well bid on slow-growth (and not un-Taper) flows...

For the second day in a row, better than expected Chinese "data" set sentiment across the board when following an improvement in its trade data (even as crude oil imports dropped to an 11 month low), last night China reported a better than expected August Industrial Production print of 10.4%, compared to 9.7% for July, and higher than the 9.9% expected. This was driven by a pick up in Chinese M2, which rose from 14.5% to 14.7% Y/Y, as the PBOC has once again resuming what it does best, injecting liquidity into the system, even if said liquidity no longer makes its way into the proper channels, as new CNY loans missed the expected CNY730bn, rising to 711.3bn for August. Elsewhere, not all was good on the Industrial Production front, following a French miss of -0.6% on expectations of a rebound to +0.5%, as well as a miss in mfg production of -0.7%, down from -0.4% and below the expected 0.7%. This, in parallel with Moscovici once again saying the 2013 deficit will be "slightly higher than 3.7%" means that just like in 2012, and with German economic metrics continuing to contract, as the periphery stages a modest rebound it is the core that threatens Europe's stability once again. Finally, and since in Europe everything is ultimately funded by current account positive Germany either directly or via TARGET2, the recent Italian economic strength, which also means a bounce in imports, meant that Italian TARGET2 liabilities (through which Germany indirectly funds Italy's current account deficit) are once again back at a 4 month high. And so the cycle repeats.

As macro news continues to trickle in better than expected, the latest batch being benign (if completely fake) Chinese inflation data (CPI 2.6%, Exp. 2.6%, Last 2.7%) and trade data released overnight which saw ahigher than expected trade balance ($28.5bn vs Exp. $20.0; as exports rose from 5.1% to 7.2%, and imports dipped from 10.9% to 7.0%, missing expectations), markets remain confused: is good news better or does it mean even more global liquidity will be pulled. As a result, the release of an encouraging set of macroeconomic data from China failed to have a meaningful impact on the sentiment in Europe this morning and instead stocks traded lower, with the Spanish IBEX-35 index underperforming after Madrid lost out to Tokyo to win rights to host 2020 Olympic Games. Even though the news buoyed USD/JPY overnight, the pair faced downside pressure stemming from interest rate differential flows amid better bid USTs. The price action in the US curve was partly driven by the latest article from a prolific Fed watcher Jon Hilsenrath who said many Fed officials are undecided on whether to scale back bond purchases in September. Hilsenrath added that the Fed could wait or reduce the programme by a small amount at the upcoming meeting. Going forward, there are no major macroeconomic data releases scheduled for the second half of the session, but Fed’s Williams is due to speak.

Global macro data has surprised to the upside in recent weeks in general. For major economies the last 3 months has seen such an 'impressive' rise that it has reached a point at which (historically) market expectations have become relatively exuberant. As the chart below shows, not only is the macro surprise index near its normalized highs (suggesting there is not much room for further positive surprises here) but each time the pace of apparent improvement has been so fast, the US equity market has faded lower as "hard" data simply does not support the hope in the markets and "soft" data (including survey-based PMI data as BAML destroys that myth below). Each time macro data has weakened and stocks have faded, central banks have rescued it - but with "taper" now required, we ask - is this as good as it gets?

"What's more fun than a Barrel of Monkeys? Nothing!" What could be better than assembling a long chain of tangled monkeys, each reliant on those either side of it for purchase, with just the one person holding onto a single monkey's arm at the top end of the chain, responsible for all those monkeys dangling from his fingers. Of course, with great power comes great responsibility; and that lone hand at the top of the chain of monkeys has to be careful - any slight mistake and the monkeys will tumble, and that, we are afraid, is the end of your turn. You don't get to go again because you screwed it up and the monkeys came crashing down. On May 22nd of this year, Ben Bernanke's game of Barrel of Monkeys was in full swing. It had been his turn for several years, and he looked as though he'd be picking up monkeys for a long time to come. The chain of monkeys hanging from his hand was so long that he had no real idea where it ended... indeed, "If the Fed really thinks that the rest of the world will have to "adjust to us" as it insists on draining global liquidity come what may, it may have a very rude surprise, yet again." One false move and all the monkeys may end up in a heap on the floor.

Having recently acquired important stakes or out-right ownership of major Canadian energy firms, Chinese companies are now continuing their penetration of Canada's energy sector by targeting the juniors. In particular, the Saskatchewan-based producer Novus Energy announced this week its agreement to be acquired for $320 million by Yanchang Petroleum International Ltd. Novus is a junior oil and gas company that targets light oil resource plays in Western Canada. Its assets are concentrated in the Viking Formation, a lithological unit in central and eastern Alberta and adjacent west-central Saskatchewan, as well as in southeastern and east-central Saskatchewan. The Viking Formation is well delineated with low-risk reserves including large amounts of "original-oil-in-place". The company plans to employ improved horizontal drilling and multi-stage hydraulic fracturing in order to increase recovery and diminish development costs. The deal follows by five months the visit by Canadian Trade Minister Ed Fast to Beijing, where he officially confirmed that Ottawa would welcome further continued investment from Chinese energy companies, even after the US$15.1 billion acquisition of the oil-sands operator Nexen.